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California Wildfire Victims Face Tallying Losses

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California Wildfire Victims Face Tallying Losses

California Wildfire Victims Face Tallying Losses

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Now that Southern California residents are returning to what's left of their homes - if there is anything left - the next step will be the grim task of calculating their losses. At least eighteen hundred homes have been destroyed; many times that number were damaged. Phone calls are pouring into insurers who are faced with covering much of the estimated $1 billion in property damage that's occurred.

On Wednesday, California Insurance Commissioner Steve Poizner declared an insurance emergency in the state. Mr. Poizner joins us now from Sacramento.

Mr. Poizner, thanks very much for being with us.

Commissioner STEVE POIZNER (California Department of Insurance): Yes. My pleasure.

SIMON: And what is an insurance emergency, and what does this declaration set off?

Commissioner POIZNER: That enables me to instruct insurance companies to bring in out-of-state claims adjusters, which is normally not allowed by California law so that they can have all the manpower they need here in California to process the claims quickly and efficiently.

SIMON: Now, it was reported on Friday, Commissioner Poizner, that the losses, as terrible as they, are still within the expected range in the insurance industry. Is that your understanding, too?

Commissioner POIZNER: Well, yes. Unfortunately, wildfires are not an unusual occurrence here. There's been over 25,000 wildfires here in California in the last five years alone. So built in to their business model and to their cost structure is a need to build these reserves to pay out these clients. And fortunately, the homeowners' insurance industry is very healthy. They'll be able to make these payments, it won't be a problem.

SIMON: Mm-hmm. What about people who might have home insurance but are underinsured, can the state help them?

Commissioner POIZNER: Worse case scenario is people find themselves underinsured or with - God forbid - no insurance at all. There are a couple of sources of moneys from the federal government. FEMA is now operating here in California, in Southern California due to this disaster, and they will grant people up to $28,000 if they have no insurance or they're underinsured. And then the Small Business Administration has set up a shop here as well now where they'll loan individuals or businesses up to a quarter of a million dollars if they're underinsured or they have no insurance at all.

SIMON: Those of us in the rest of the country have seen and heard this week that more and more people have been moving into areas that are at risk from fire damage. You mentioned that twenty-five thousand wildfires have occurred in the past few years alone. Why should insurance companies underwrite policies for people moving into areas that have a high probability really of being struck by wildfires? And why should policyholders help them do that?

Commissioner POIZNER: Well, I'm a big believer that one set of policyholders should not be subsidizing other policyholders, and I think a homeownership pay for their homeowners' insurance, which includes, you know, the fire coverage based on the risks. So if you build a house in a fire-prone area, you should pay more, a lot more as compared to someone who builds a home in an area where is no chance of wildfire at all.

SIMON: But how are policies written right now? Do people who move in those areas have to carry a greater insurance burden?

Commissioner POIZNER: Oh, yes, they do. And I think by upgrading building codes, by providing significant incentives to implement some mitigation techniques around one's home, and also making sure that insurance companies properly price their policies so that if people live in a higher risk area, they pay a heck of a lot more. That will go a long way to fixing some of the risks that we have here in the state.

SIMON: Steve Poizner, insurance commissioner for the state of California. Thanks very much.

Commissioner POIZNER: You bet. Thank you.

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